February 5, 2015 By Surbhi S — 3 Comments

Difference Between PERT and CPM

Difference Between Micro and Macro

Economics

Difference Between Developed

Countries and Developing Countries

Difference Between Management and

Administration

Difference Between Qualitative and

Quantitative Research
Business is carried out with an aim of earning profit. It works as an incentive to the
entrepreneur, for the risk taken and resources spent, during the financial year.
Profit can be broadly classified as gross profit, operating profit and net profit.
Gross profit implies the amount left over from revenues after deducting the
Difference Between NOPAT and Net
manufacturing cost. It shows the firm’s efficiency in production and pricing.
Income

Difference Between Gross Profit Margin

and Net Profit Margin

Difference Between Gross and Net

Income

Difference Between Gross Profit and

Gross Profit Margin

Difference Between Net Income and Net

Profit

Conversely, operating profit alludes to the profit attained after deducing cost of
production and operating expenses from the net sales. It helps to guage the overall
operating effectiveness and performance of the company. Lastly, net profit
denotes the amount of earnings left with the firm, after deducting all expenses,
interest and taxes. It is a key indicator of company’s ability to convert sales into
profit.

Take a read of the given article to underdtand the difference between gross,
operating and net profit.

1. Comparison Chart
2. Definition
3. Key Differences
4. Similarities
5. Conclusion
 BASIS FOR GROSS OPERATING
NET PROFIT
COMPARISON PROFIT PROFIT

Meaning Gross Profit is the Operating Profit is Net Profit is the

income of the the income of the residual income
company left company left after left with the
after paying off paying off operating company after all
the direct expenses. deductions.
expenses.

Objective A rough estimate To know how well To know the

about the the company is actual profit
company's allocating its made in a
profitability. resources on particular
expenses. accounting year.

Advantage Helpful in Helpful in Helpful in

controlling excess eliminating knowing the
costs. unnecessary performance of
operating expenses. the company in a
financial year.

Difference Between Could and Would

Difference Between That and Which

Difference Between Rise and Raise

Difference Between Say and Tell

Difference Between Already and All

ready

Difference Between Moral and Morale

Difference Between Everyday and Every

Gross Profit is the profit remained with the company after reducing all direct costs
day
like material, labor, overhead from Net Sales. The cost of goods sold includes all
those costs which are spent in the production and distribution of the product. It Difference Between Adverse and Averse
symbolizes that how effectively and efficiently the company allocated its resources
Difference Between For and Since
so that the best possible result is achieved at a very low cost.
Difference Between Must and Have to
Gross Profit helps in calculating the other profits of the company. It can be
calculated as under:

Operating Profit is the profit earned from the regular business activities of the
enterprise. After we arrive at the Gross Profit, when operating expenses (indirect
expenses) like depreciation, salary, insurance, rent, electricity and telephone
expenses are subtracted from it, then Operating Profit arises. It is also termed as
Earnings Before Interest and Taxes (EBIT) when there is no Non-Operating
Income. It can be calculated as under:
Net Profit is the surplus (positive value) remained with the company after Key Differences
deducting all expenses, interest, and taxes. After we arrive at the Operating Profit, 7.517 suka

then the interest on long-term debt and taxes are deducted from it, which results in
Net Profit. It discloses the present profitability position of the company. Along with
that, it reflects the success and failure of the entity.

Net Profit is also referred as Earnings After Taxes (EAT). It is shown in the bottom
line of the income statement. It can be calculated as under:

1. Gross Profit is the income left after deducting direct expenses;

Operating Profit is the income remained after deducting indirect
expenses from gross profit and Net Profit is the net of all expenses,
interest, and taxes.

2. Gross Profit is the temporary estimate of company’s earnings,

Operating Expenses shows the operating effectiveness of the entity, but
Net Profit reveals the actual profit made during the year.

3. Gross Profit helps in reducing extra costs. Operating Profit helps in the
elimination of unnecessary expenses while Net Profit provides the
overview of the current position of the entity.

All are a part of the Income Statement.

Helpful for the readers of the financial statement.
Shows Profitability.

The three types of profit, which we have discussed, are three stages of the Profit.
The meaning of the three is very clear as well as there is no contradiction in
understanding them. At the fundamental level gross profit exists which is followed
by operating profit at the middle level and finally the net profit at the bottom level
which is the finest form of profit as it arises after deducting all expenses, taxes, and
interest.